Arnold, Houston In Talks

DPH Expected to Go Along With Possible Buyout

BOSTON–Arnold Communications chairman Ed Eskandarian is in negotiations to buy Houston Herstek Favat. The deal would bring Houston Herstek into the Arnold fold and provide an exit for beleaguered agency founder Doug Houston.
Eskandarian last week confirmed the negotiations, saying: “Any agency would like to have the terrific people, great work and excellent clients they have.”
Though it lost $100 million in billings this year when clients such as Fidelity Investments and NEC Computer Systems defected, Houston Herstek still has some assets Eskandarian apparently believes are worth acquiring. A deal would bring aboard top-flight creative directors Rich Herstek and Pete Favat as well as three sizable accounts: Converse, Champion International Paper and the Massachusetts Department of Public Health’s Tobacco Control Program.
Dr. Greg Connolly, who heads up the taxpayer-funded Tobacco Control Program for the Bay State, said last week he has been informed that talks are taking place between the Boston agencies.
If the deal goes through, “we would then have to sit down with Arnold,” Connolly said. “We may have to take a look at the contract, amend the contract.” A deal between the shops, however, would not automatically throw the $12 million, award-winning anti-smoking account into review, Connolly said. “I’m not thinking about a review . . . Really, this is all premature right now.”
According to a source close to the negotiations, Eskandarian and Houston have not signed a letter of intent but discussed whether such a deal would work “for both agencies’ clients and people.” Eskandarian was described by one source as being “very optimistic” last week that a deal would result from those discussions.
Houston, chairman and majority owner of Houston Herstek, was said to be on vacation and did not return phone calls seeking comment. Houston Herstek president Lisa Unsworth also did not return phone calls.
While Houston is the majority stockholder in the agency, those with a minority interest include Unsworth, Herstek, Favat, creative executive Stu Cooperrider, research director Tom Birk and chief financial officer Joe Pessolano.
Eskandarian is not negotiating to buy out Houston’s ownership stakes in Hampel/Stefanides in New York and San Francisco or Houston Helm & Co. in Los Angeles, sources said. Houston is believed to own as much as 90 percent of the agencies that bear his name and hold a minority stake in Hampel/ Stefanides. Larry Hampel and Dean Stefanides have been trying to cash Houston out of their operation for some time. Neither Hampel nor Stefanides returned calls last week.
Houston Helm president Greg Helm said, “[Doug Houston] has made me feel that what he does in Boston has nothing to do with Houston Helm and Hampel, if not explicitly, implicitly.”
Houston retained New York financial consultant David Weiner this summer to solicit buyers for his agency holdings, including Hampel/Stefanides. At the time, Houston confirmed Weiner was evaluating offers and working on “partnership issues” but would not discuss specifics [Adweek, July 21].Weiner is believed to be advising Houston in his talks with Eskandarian. Weiner could not be reached for comment last week.
Arnold itself has been up for sale for some time. Its most recent suitor, Wolf Group of Toronto, claims to have signed a letter of intent with Eskandarian [Adweek, Oct. 27], though both sides have conceded that it is unlikely a sale would go through.
Eskandarian would not discuss details of his negotiations with Wolf Group other than to explain that a letter of intent simply allows each company to explore the other’s finances and references while providing some assurance of confidentially. While such a letter does prevent Eskandarian from engaging in negotiations with other suitors, it does not prevent him from being a suitor himself.
–with Teresa Buyikian